Reciprocal Lend Lease.

Have examined U.S. memorandum [1] (received from American Minister
[2]) and following views of Government on questions raised are
transmitted for purpose of discussions. They should be read in
conjunction with my telegram 14 of 31st March. [3]

(1) Lend Lease Agreement
We are not at present clear what precisely is meant by this
paragraph. We have since received telegram 358 of 4th April from
British Government which apparently envisages separate agreements
for reciprocal aid linked to U.K.-U.S.A. Mutual Aid Agreement. [4]
So far as Australia is concerned we feel that if U.S.A. desires
results of discussions embodied in formal agreement it should be
confined to immediate issues dealing on one hand with reciprocal
aid to U.S. and on the other hand with assistance by U.S. and U.K.

to safeguard our balance of payments. A short agreement involving
all parties would serve our interests best and would appear
sufficient.

We would prefer this to the course mentioned in 3 (a) of telegram
referred to which would involve separate agreement on lines of
full Mutual Aid Agreement. If it is necessary to link up
triangular agreement as suggested above to Mutual Aid Agreement
this might be done by simple reference to Article 2 rather than by
invoking whole of that agreement.

(2) Assistance to U.S. Forces in the Field
Views of the Government are:-

(a) Willing to provide local supplies and services as far as
practicable having regard to convenience of supply and economy in
shipping. (Assume this is intended to apply only to U.S. forces in
Australia. If desired, however, to cover forces elsewhere, for
instance Philippines for which we have provided supplies to value
of close on 500,000, please advise.)
(b) Agree as general principle assistance under (1) should be
furnished as reciprocal aid.

(c) Consider some flexibility will be necessary, for instance,
there are some local expenditures which it is desirable or
convenient for U.S. forces to make from their own funds. Line of
demarcation can be worked out here with U.S. authorities.

(d) Pay and allowances should be provided by U.S. This is now
being done by U.S. buying Australian currency and arrangements are
satisfactory.

(e) All supplies from U.S. or other oversea countries should be
provided by U.S. Allied Supply Council has been examining question
of supplies generally and has listed certain articles to be
obtained from U.S.

(3) Shipments to U.S. or upon its Order
(a) Government accepts as general principle that any military
equipment supplied by Australia should be provided as reciprocal
aid.

(b) All other exports from Australia to U.S. should continue to be
paid for in dollars.

(4) British Commonwealth Dollar and Exchange Position
(a) For reasons given in my telegram 14 Government regards it as
essential that Australian balance of payments should be assisted
in such a way as to maintain our sterling balances at reasonable
level.

(b) For current financial year a deficiency of 65 million pounds
Australian is expected made up of U.S.A. 16, Canada 16, U.K. etc.

33. As U.K. provides exchange to meet our payments in U.S.A. and
Canada this really means a sterling deficiency. (Some improvement
expected next year but appreciable deficiency still likely.) For
current year we are proposing to provide 35 million from reserves
of London funds which will be reduced to below 50 million which is
regarded by Commonwealth Bank as dangerously low level. We had
previously commenced talks through Bruce [5] for U.K. to provide
balance by leaving 30 million of overseas war expenditure on open
account and have been awaiting results.

(c) It is suggested that desired assistance should be worked out
by some triangular arrangement between U.S., U.K. and Australia in
which dollar position of United Kingdom and Australian sterling
balances are safeguarded.

(d) Government greatly appreciates desire expressed in unofficial
views of Acheson [6] 'to work out some indirect means whereby
Australia can meet cost of American requirements in Australia and
U.S. can reimburse us by helping to meet some of our other
overseas obligations to roughly an equivalent amount'. The
following methods of indirect assistance should be first
suggested:-

(i) Maximum diversion to Lend Lease of present cash obligations
for supplies from U.S.A. (See 4(e) of telegram 14.)
(ii) All future war and essential civil needs (including motor
spirit) required by Australia and which U.S. can supply to be
provided by U.S. under Lend Lease.

You might also explore generally with U.S. authorities possibility
of assistance in connection with our other overseas obligations
including imports from Canada and interest on our public debt in
U.S.A.

(e) Apart from proposals mentioned in (d) it will still be
necessary to arrive at some broad agreement which will ensure our
sterling funds being maintained at reasonable level without
incurring liability for post war debt. Government stresses great
importance of this requirement and considers it should be done as
part of triangular arrangement.

(5) General
The foregoing is, of course, subject to modification in the light
of such further questions as may arise in the course of the
discussions and we shall be glad if you will keep us fully advised
particularly on 4.

A separate cable has been forwarded to the Legation [7] making
some alteration in figures telegraphed in our 251. Amended figures
are best estimates now available but unforeseen circumstances may
result in some further variation.

The question of detail records to be furnished to U.S. regarding
all forms of reciprocal aid by Australia may arise. We desire to
avoid too much detail and suggest this could best be discussed
with U.S. authorities here.

CURTIN